Business Brain column: Explaining the when and what of the new Scottish income tax

Gail Kritiansen

I have 15 employees and have received tax notifications from HMRC for 10 of them. The codes are S1100L – should they not all be the same?

The short answer is probably not! The personal allowance for 2016/17 rose to £11,000 on April 6, making a standard tax code of 1100L. However, on the same date, a Scottish income tax rate was introduced. That rate is 10 per cent, the same as the rest of the UK.

The Scottish income tax rate, is denoted by a prefix of “S” on the tax code, and applies to anyone having a main home in Scotland. This includes people who work in England but live in Scotland.

People who don’t have a home, and stay in Scotland regularly, for example for offshore work, may be considered as being Scottish Income Tax Payers depending on the number of days they physically spend in Scotland.

You will not pay more than the rest of the UK in income tax - rather your tax is split between the Scottish rate and the UK rate.

For example, a basic rate Scottish taxpayer would pay 10 per cent Scottish rate and 10 per cent UK rate, given a total of 20 per cent. This is the same rate as the rest of the UK. The split on higher rate tax payers is still 10 per cent Scottish income tax, but with 30 per cent of UK rate tax, a total of 40 per cent and again the same as the UK.

If you move to or from Scotland during a tax year, the length of time you spent in each country determines if you are a Scottish tax payer. For example, if you spent 150 days in England and 206 in Scotland, you would be classed as a Scottish tax payer.

Presumably the five employees you have not received an HMRC notice for do not have a main home in Scotland. Anyone who thinks they should be registered for Scottish income tax should let HMRC know if they have not received a letter advising them that they are being included as a Scottish Tax Payer.

Gail Kristiansen is a Book Keeping Manager for Rennie Welch LLP and can be contacted on 01573 224931 or via email gail.kristiansen@renniewelch.co.uk